Brian Harris is Chief Product Officer at Currencies Direct having joined the company in January 2017 and. He is responsible for defining and delivering customer-focused B2B products. Brian has 10 years in the payments and foreign exchange industry, having delivered a number of innovative and award-winning products and marketing programs. Prior to joining CD, Brian was Chief Marketing & Product officer at Western Union Business Solutions leading teams across 30+ markets.
Today Brian shares his knowledge of Research and Development tax relief as if your small business qualifies then you should be claiming:
Is your business missing out on Research and Development tax relief?
The UK government offers tax relief for companies that undertake grant-funded or subsidised research to improve the fields of science or technology.
Research and Development credits are designed to encourage companies to keep investing in R&D by providing a strong financial incentive that greatly reduces tax bills.
It’s therefore worth understanding what it is and how much you could receive.
What does this mean for SMEs?
Many small businesses can claim R&D tax relief, but a large number of them aren’t aware of this.
There are around 3.5 million SMEs actively trading in the UK at present, with 57% of those eligible for R&D tax credits, but only 1% of have actually made a claim.
This leaves £84 billion in backdated R&D tax relief owed to just under 2 million SMEs.
How to identify if your business is eligible
There are two schemes that can provide you with R&D tax relief; the SME scheme and the Research and Development Expenditure Credit scheme (RDEC).
Depending upon the size of your business and the type of funding or subsidy you received to fund your work, you may be able to claim from one, or both schemes.
There are several criteria your R&D activities will have to satisfy in order for your company to qualify for tax relief.
Most of this boils down to proving that your R&D was actually being carried out to make an advance in science or technology, that you were aiming to discover something knew, and that you were doing something that another professional in the field couldn’t easily have worked out for themselves.
The government has provided its own guidelines on what qualifies for R&D tax relief on the gov.uk website.
When is the funding available? How much can you expect?
The RDEC provides a tax credit for up to 12% of your qualifying expenditure.
If your business is loss making, you can claim up to 14.5% of the surrenderable loss in tax relief.
The government provides an uplift for SMEs of 230% of their qualifying R&D costs, meaning that an eligible company would receive tax relief for £230 of expenditure for every £100 it spends.
You can still apply for R&D tax relief if you are an SME that has been contracted by a large company to undertake Research and Development work.
SMEs may also be eligible for ‘Advance Assurance’, which helps with your first three R&D tax relief claims, guaranteeing that they will be accepted without the need for further inquiries.
The average R&D tax relief claim is around £43,000; what could your business do with that extra cash?
What should you do if you think you qualify?
If you think you are eligible for R&D tax relief, you should submit your application alongside your company tax return.
You can claim for a back payment of your R&D tax relief for eligible projects within two years of the accounting period during which the expenditure was registered.
Don’t be one of the millions of businesses missing out on tax relief
With so much money on the table, it’s worth checking whether or not you qualify for R&D tax relief.
It could be a significant boost to your budget, freeing up tens of thousands of pounds to reinvest in your business.